Banks have tightened construction loans because of fears about overbuilding. However, Arixa Capital is only lending on residential construction projects. GlobeSt.com sat down with Arixa Capital's Managing Director and Chief Investment Officer Jan Brzeski for an exclusive interview.
This edition of Arixa's newsletter includes:
- The growth of our investment programs and the launch of our second fund
- Our annual panel discussion at UCLA in conjunction with the Ziman Center and the Anderson School
- An update on Arixa's first assignment as a court-appointed receiver; and
- Information on a new white paper by Jan Brzeski
Nine years ago I began working full time in the real estate investment field. While I use an HP 12C calculator and I like it a lot, I find it cumbersome to use for common real estate calculations. With a little help from Google, I found the attached spreadsheet online which I have adapted for my own use. Perhaps you will find it useful, too. Please click here to download the excel file.
What is it good for? This spreadsheet comes into play when you are interested in determining the cash flow you will receive from buying income property and financing that purchase with a loan. To do this, it is really helpful to know the mortgage constant for the loan given the interest rate and amortization period. This spreadsheet gives you that information, and it shows you exactly where all the money goes (unlike the HP 12C which just gives you the amount of the payment, if you are able to remember the sequence of buttons to press correctly).
How it works On the tab entitled, "Worksheet," you enter the items in red. Specifically, you need the interest rate on the loan that you can obtain; and the amortization period. You can enter the actual loan amount, although I usually don't bother because I am interested in the mortgage constant, not the actual monthly payment.
Why does the mortgage constant matter so much? As a buyer of income property, investors should be very interested in the relationship between the capitalization rate and the mortgage constant on the loan they can obtain for the acquisition. We like situations where the cap rate is higher than the mortgage constant, because this means our cash-on-cash return will be higher than the cap rate. This situation is known as "positive leverage" in the world of income property investment.
If you are interested in learning more, please contact us and we would be happy to go into more detail on this subject. The topic is addressed in some detail in my book, which is available on Amazon (click here if interested).
This podcast explains why we do not make loans secured by owner-occupied homes but instead focus exclusively on lending to professional real estate investors. Lending to homeowners who have poor credit is a separate business and we have no interest in this business for a variety of reasons, some of which are explained in the podcast.
This podcast explains the organic process through which we launched our residential bridge lending program. The founder of Standard Capital had cash available and was looking for something very safe with a fairly short maturity as an interim investment. The residential bridge loans went so well that Standard Capital launched a program allowing other investors to participate in these investments. The process was not planned out ahead of time, it evolved naturally as it became clear that the program really works.
This podcast examines three different sub-markets within the trust deed investing universe: (1) single family residential "fix and flip" six-month loans; (2) single family investor loans of up to 24 months; and (3) commercial real estate bridge loans of 12-24 months. The podcast compares and contrasts these three areas from the investor's perspective. Please watch our blog as we will be posting one new podcast roughly every week. There will be about 30 podcasts total in the series, and this is the seventh. If you are interested in learning more about what we do, please sign up for our newsletter at www.arixacpital.com or give us a call at 310-846-1754.
This podcast outlines selective positives and negatives of investing in trust deeds. The main focus is to highlight the limitations of trust deed investing so that investors go into this type of investing with realistic expectations‚ and steer clear if this type of investment does not match their objectives. Please watch our blog as we will be posting one new podcast roughly every week. There will be about 30 podcasts total in the series, and this is the sixth. If you are interested in learning more about what we do, give us a call at 310-905-3050.
What we saw: A 46-acre commercially-zoned parcel located within the City limits of the rapidly growing town of Shafter, California. The site is bordered by State Highway 46 and Santa Fe Way, a busy county road leading back to West Bakersfield. The property generates solid cash flow and will eventually be redeveloped into a shopping center.